Niagara Mohawk-National Grid merger may drop residential electricity bills 5 percent

SYRACUSE and WESTBOROUGH, N.Y., Oct. 12, 2001 – Niagara Mohawk Power Corp.’s residential customers are expected to see a 5 percent electricity bill decrease under a proposed merger and rate plan settlement agreement announced by Niagara Mohawk Holdings Inc. and National Grid Group plc.

The agreement, reached with the New York State Department of Public Service staff and other parties, was filed late Thursday with the New York State Public Service Commission for approval. If the merger closes, it would result in net customer savings of about $1 billion over the next 10 years, compared with rates projected without the merger. Also, as part of the agreement, the companies would expand Niagara Mohawk’s annual Upstate New York economic development efforts by $12.5 million.

“Niagara Mohawk’s merger with National Grid will allow us to reduce and stabilize energy delivery costs and enhance our commitment to economic development in the communities we serve,” said William F. Edwards, Niagara Mohawk’s senior vice president and chief financial officer. “We believe this agreement will provide significant benefits to Upstate customers and to the economy.”

“The rate cuts, low-income protection, and other benefits agreed to in this plan will help National Grid fulfill our commitment to become a positive presence in Upstate New York,” said Lawrence Reilly, senior vice president and general counsel for National Grid USA.

“The significant size of the merged companies will provide us with the resources and skills necessary to deliver first-rate customer service while being a low-cost provider of electricity and natural gas service,” he said. He added that the agreement details a comprehensive service quality plan under which customer safety, reliability, and service will be maintained and enhanced after the merger. The plan calls for up to $24 million in annual penalties – or more under certain conditions – if defined customer service and reliability goals aren’t achieved.

Niagara Mohawk’s actual costs for delivery of electricity are expected to drop by more than 8 percent through the merger. When those savings are applied to a customer’s entire electricity bill – which also includes the cost of electricity purchased – the net savings are projected to equal 5 percent.

The reduction would be implemented upon consummation of the merger. At that time, today’s agreement calls for customers’ delivery charges to be immediately reduced by approximately $160 million. After that decrease, delivery charges would remain stabilized for 10 years subject to limited adjustments. In addition, the companies would forgo collection of approximately $850 million in nuclear costs that otherwise would have been collected from customers.

The long-term proposal has a number of other initiatives, including:

* Price-stabilized electricity commodity service for residential and small commercial customers for several years, providing those customers with significant protection from any major fluctuations in the generation marketplace.

* The extension by 16 months of a multi-year gas rate settlement, resulting in gas delivery rates – unchanged since 1996 – remaining the same through December 2004.

* The extension of the Low-Income Customer Assistance Program, which was expanded under Niagara Mohawk’s existing regulatory agreement with the PSC, and the development of a special rate for eligible low-income customers.

* The establishment of electricity choice educational programs targeted to customers and energy service companies.

* Environmental benefits such as interconnection assistance for wind power sources, support for “green” power marketing, and the continued sale of surplus land for preservation.

The agreement culminates five months of negotiations among Niagara Mohawk, National Grid, the Department of Public Service staff, and other parties including large industrial customers, energy service companies, and various state agencies.

“This joint proposal continues the recent downward trend in Niagara Mohawk’s delivery rates for businesses and provides additional rate and service options for those customers, all of which should enhance business expansion and economic development across Upstate New York,” said Robert Loughney on behalf of Multiple Intervenors, a trade association representing the interests of the state’s largest commercial and industrial employers.

The proposed settlement is supported by two major national environmental groups: the Natural Resources Defense Council, and Environmental Defense. It also is supported by the American Wind Energy Association and by Community Energy, a green power marketing company.

“The merger agreement benefits the environment and the economy, by providing customers with an easy way to purchase renewable energy products on their electricity bill, and by stimulating a large new investment in wind energy generation in Upstate New York,” said David Wooley, counsel for the four environmental interests. “In this proposal, National Grid demonstrates that it intends to continue Niagara Mohawk’s established record of responsible environmental stewardship.”

A advocacy group for low-income customers also supports the joint settlement proposal.

“Specifically and positively addressed in this proposal are the needs of many customers who struggle to make ends meet,” said Ben Wiles, an attorney for the Public Utility Law Project. “The opportunity created by the merger of National Grid USA and Niagara Mohawk will result in a special reduced rate for as many as 60,000 eligible low-income customers. It also will expand Niagara Mohawk’s safety net program to allow more people to receive assistance.”

Among the other parties to sign the settlement was the International Brotherhood of Electrical Workers Local 97, which represents Niagara Mohawk’s unionized work force. In addition, the Distributed Generation Power Coalition, energy marketers, energy services companies, and regional economic development agencies support the settlement proposal.

The companies have asked that the matter be considered at the PSC’s Nov. 28 meeting. The merger also is subject to Securities and Exchange Commission approval.

Niagara Mohawk Holdings Inc. is an investor-owned energy services company that provides electricity to more than 1.5 million customers across 24,000 square miles of Upstate New York. The company also delivers natural gas to more than 540,000 customers over 4,500 square miles of eastern, central, and northern New York.

National Grid USA includes local electric companies Massachusetts Electric, Narragansett Electric, Granite State Electric, Nantucket Electric, and a substantial transmission business. Its parent company, National Grid Group plc, builds, owns, and operates electric and telecommunications networks around the world.

Author

  • The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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